Constitutional Court Decision on the Threshold for a Temporary Respite in Concordat
Introduction
Concordat affords a debtor who is unable to pay its debts although they have fallen due, or who is under the risk of being unable to pay them when due, the opportunity to pay its debts by way of an extension of time or a reduction, or to be saved from a probable bankruptcy.[1] The stage at which the concordat begins to produce effects for the debtor and the creditors is the decision granting a temporary respite. Article 287, paragraph one of the Execution and Bankruptcy Law provides that, upon a concordat request, the court shall immediately grant a temporary respite once it determines that the documents listed in Article 286 of the Law are present in full.[2]
The wording of the provision appears to confine the court’s examination at this stage to the existence of the documents. The temporary respite, however, is a severe measure that suspends the creditors’ power to pursue enforcement and immediately restricts the debtor’s power of disposition. In the face of this severity, the Local Court considered it contrary to the Constitution that the judge is afforded no means of filtering out concordat requests made in bad faith and applied for concrete norm review seeking the annulment of the provision. The Constitutional Court unanimously rejected the application by its decision dated 16.04.2026, Merits No. 2025/249, Decision No. 2026/79, and the decision was published in the Official Gazette dated 14.07.2026.[3]
The decision is significant not only for its outcome, but also for the criterion it lays down as to the extent to which the legislature may narrow the judge’s discretionary power. In this article, after the reasoning of the decision has been examined, its relationship with the Constitutional Court’s earlier case law on concordat provisions and the extent to which the review model it envisages corresponds to the practice of the courts of instance will be addressed.
The Rule Under Review and the Temporary Respite Regime
Article 286 of the Execution and Bankruptcy Law lists, in five subparagraphs, the documents that must be attached to a concordat request. These include the preliminary concordat project, the documents showing the status of the debtor’s assets, the list showing the creditors and the amounts of their receivables, and the table comparing the amount the creditors are expected to receive under the proposal in the preliminary project with the probable amount they would receive in the event of the debtor’s bankruptcy. Last on the list is the audit report prepared by an independent audit firm authorised by the Public Oversight, Accounting and Auditing Standards Authority, providing reasonable assurance that the proposal in the preliminary project will be realised.[4]
The decision granting a temporary respite produces the consequences of the definite respite. Accordingly, pending enforcement proceedings are, as a rule, stayed during the respite and no new proceedings may be commenced,[5] and the debtor’s power of disposition is also considerably restricted.[6] The temporary respite is three months and may be extended by a maximum of two months upon the request of the debtor or of the temporary commissioner. By contrast, no appellate remedy is available against decisions concerning the acceptance of the temporary respite request, the appointment of a temporary commissioner, the extension of the respite and the interim measures.[7]
As can be seen, the creditor is faced with a decision that is not subject to appellate review and that suspends the possibility of collecting its receivable for a period of three to five months. This is also the starting point of the referral.
The Referral and the Constitutional Review of Concordat Provisions
In the referral decision it was argued that the grant of a temporary respite is made mandatory in respect of every debtor submitting the required documents, that no discretionary power is left to the judge in assessing the documents and evidence submitted, that requests made in bad faith cannot be reviewed even though the temporary respite directly affects the legal position of the creditors, and that the unavailability of an appellate remedy against the decision violates the right of access to a court.
The referral forms one link in the increasingly frequent submission of concordat provisions to constitutional review in recent years. In 2025, the Constitutional Court found subparagraph (b) of the first paragraph of Article 292 of the Law, which provides that, in respect of a debtor subject to bankruptcy, where it is understood that the concordat cannot succeed, the definite respite shall be lifted, the concordat request rejected and the bankruptcy of the debtor ordered ex officio, to be in conformity with the Constitution. By contrast, in another decision rendered in 2024, it annulled the phrase in the second paragraph of Article 297 making the grant of permission to the debtor to dispose of assets subject to the consent of the creditors’ committee.[8] As will be seen below, an understanding of the decision under review largely depends on identifying the distinction between these two decisions.
The Assessment of the Constitutional Court
Conducting the Review on the Axis of the Right to Property
Although it was argued in the referral that the rule was contrary to Articles 36 and 138 of the Constitution, the Constitutional Court carried out its examination under Articles 5 and 35 of the Constitution and did not consider it necessary to make a separate assessment under Articles 36 and 138 of the Constitution. According to the Court, the decision granting a temporary respite must be examined within the scope of the right to property in respect of both parties, since it restricts, on the one hand, the debtor’s power of disposition over its assets and produces, on the other hand, effects on the enforcement proceedings initiated by the creditors.
Following this finding, the reasoning is built upon the State’s positive obligations concerning the right to property. The State bears the responsibility of establishing an effective system for the collection of receivables, and in establishing this system the rights and interests of the debtor and of third parties must be taken into account as much as those of the creditor. The Court further emphasises that the interests to be balanced in concordat are not limited to the debtor and the creditor; the loss by undertakings of their economic assets gives rise to a loss of employment for employees and, for the country, to a risk to the investment environment.
The Function of the Audit Report Providing Reasonable Assurance
The Constitutional Court responds to the referring court’s objection that requests made in bad faith cannot be filtered out by pointing to the centre of gravity of the review. According to the Court, this filter is not the judge’s free discretion, but the audit report providing reasonable assurance that must be attached to the request. Prepared by independent audit firms subject to the supervision of the Public Oversight, Accounting and Auditing Standards Authority, this report serves to prevent requests that cannot be realised, in other words requests that do not pursue the aim of improving the debtor’s economic situation and that are contrary to the rule of good faith. The reliability of the report is in turn supported by an institutional liability regime: independent audit firms are held legally liable for the damages that may arise from the report’s non-compliance with auditing standards or from incorrect, incomplete and misleading information and opinions contained in the report, and, depending on the circumstances, the suspension or revocation of their operating licence or an administrative fine may be ordered against them.
The assessment of principal importance in the decision is made at this point. The Court establishes that the Law grants the judge discretionary power to examine the documents listed in Article 286 and to determine whether they are incomplete but requires a temporary respite to be granted once the conclusion is reached that the documents are not incomplete. The temporary respite is an interim measure of limited duration, granted essentially based on technical and objective criteria. In view of this character, there is no constitutional obstacle to the legislature narrowing the judge’s discretionary power in matters that have a technical dimension and require swift intervention; otherwise, the rapid protection mechanism envisaged by the Law could lose its function.
The Balance of Interests
In examining whether a reasonable balance has been struck between the conflicting interests of the parties, the Court primarily considers the duration of the respite. According to the Court, the maximum period of five months must be regarded as reasonable in view of the aim of enabling the debtor to continue its commercial activities and to pay its debts. The unavailability of an appellate remedy, on the other hand, is compensated by another safeguard: the decision granting a temporary respite is announced, and the creditors are afforded the opportunity to object by petition within a peremptory period of seven days as of the announcement, asserting with their evidence that no circumstances warranting the grant of a respite exist.[9] Finally, by virtue of the application by analogy of Articles 291 and 292 of the Law to the temporary respite, the court may lift the respite ex officio in cases such as where it is understood that the concordat cannot succeed or where it is established that the debtor has acted with the aim of causing damage to its creditors.[10] Assessing these safeguards together, the Constitutional Court concluded that the balance of interests is not upset under the rule.
Assessment of the Decision
Comparison with the 2024 Annulment Decision in Terms of the Narrowing of Discretionary Power
The Constitutional Court’s approach to the narrowing of the judge’s discretionary power is not one-directional as regards concordat provisions. By its decision dated 04.04.2024, the Court annulled the phrase “…consent…” contained in the third sentence of the second paragraph of Article 297 of the Law, finding it contrary to Articles 5 and 35 of the Constitution. The grounds for annulment rest directly on the elimination of discretionary power: making the grant of permission to the debtor to dispose of assets subject to the consent of the creditors’ committee leaves no room for the court to assess whether the grant of permission is more suitable to the interests of the parties; a fair balance may be struck only where the decision of the creditors’ committee is likewise open to review and the judge is afforded discretionary power.[11]
In the decision under review, by contrast, the same Court found a rule binding the judge to the determination that the documents are complete to be in conformity with the Constitution. Although the criterion distinguishing the two decisions has not been expressly formulated, it may be inferred from the reasoning. In the 2024 decision, the will of the court was made dependent on another will not subject to review, namely the decision of the creditors’ committee. In the decision under review, however, the judge is bound by a technical document that is amenable to review and based on objective criteria. To this must be added that, whereas the restriction under Article 297 continues throughout the definite respite, the temporary respite is limited to a maximum of five months. In our view, the Court’s criterion is not so much whether the discretionary power has been narrowed, but rather whether the narrowing is tied to a reviewable and objective basis or to the unreviewable will of a third party, and whether it produces a temporary or a permanent effect.
The Scope of the Review of the Report in Practice
The first limb of the criterion, namely that the basis be of a reviewable nature, also brings with it the question whether the report presented in the decision as a safeguard genuinely bears this quality. The implicit assumption of the decision is that the examination at the temporary respite stage will remain limited to the existence of the document. Where no document at all is attached to the concordat request, practice indeed remains within this framework, and the request is rejected on the ground that the documents listed in the Law have not been submitted. The situation changes, however, where the documents are formally submitted. Since the standards according to which the audit report providing reasonable assurance is to be prepared are regulated in detail in the Regulation, the courts do not content themselves with the title of the document submitted, but examine the report’s compliance with the standards, in other words its content.
Indeed, one court determined that the report submitted together with the request for a temporary respite was “far from being a reasonable assurance report, with a clarity that does not even call for an expert examination”, that no audit whatsoever had been carried out and that the report consisted merely of wishes concerning the continuation of the proceedings, and rejected the request for want of a procedural requirement. Another court, in a multi-party application, established that there were no separate project and separate report for each debtor, that the consolidated financial statements were not amenable to audit and that the working papers underlying the report had not been submitted, and rejected the request on procedural grounds.
Where the court of instance rejects the request upon determining that the document submitted does not bear the character of an audit report providing reasonable assurance, it does not act contrary to the wording of the rule; it ultimately determines whether the document submitted is of the quality required by the Law. Nevertheless, this practice reveals a dynamic different from the mechanism envisaged in the decision. The Constitutional Court shifts the weight of the review from the judge to the independent audit firm, whereas practice returns this weight to the judge. For the liability regime provided for in Decree-Law No. 660 concerns the subsequent review of the report and does not answer the concrete question faced by the judge at the temporary respite stage, namely whether the document before him genuinely bears the character of a report. This finding does not render the rule contrary to the Constitution, but it demonstrates that the safeguard relied upon by the Court is not sufficient on its own.
The Appellate Remedy in Respect of Decisions of Acceptance and of Refusal
The sixth paragraph of Article 287 of the Law has closed the appellate remedy only in respect of decisions accepting a request for a temporary respite. The regional courts of appeal characterise that provision as a special norm and accept that Article 341 of the Code of Civil Procedure is displaced. Practice differs as regards decisions of refusal: in all of the first instance decisions referred to above, the judgment was rendered with the appellate remedy expressly available.
Appellate review thus operates only where the debtor’s request has been refused. Where the temporary respite is granted, that is, where the interest of the creditor is directly and adversely affected, the review remains limited to the seven-day right of objection afforded to the creditors under Article 288. It should be recalled that the Constitutional Court, too, regarded this possibility as the principal safeguard compensating for the unavailability of an appellate remedy. Accordingly, the effective exercise of that objection constitutes the factual basis of the rule’s conformity with the Constitution. The creditor’s ability to access the case file and submit evidence within a period as short as seven days therefore acquires particular importance in practice.
The Binding Effect of the Decision
The most concrete consequence of the decision in terms of practice arises from the fourth paragraph of Article 152 of the Constitution and paragraph (1) of Article 41 of Law No. 6216. Under those provisions, no fresh referral may be made alleging the unconstitutionality of the same statutory provision until ten years have elapsed from the publication in the Official Gazette of a decision of rejection rendered upon an examination of the merits. Accordingly, the phrase contained in Article 287/1 of the EBL may not be subjected to constitutional review by way of concrete norm review for ten years as of 14.07.2026.
The remaining avenue is the individual application. It is possible for the creditor to assert that, in the circumstances of the particular case, the decision granting a temporary respite constitutes a disproportionate interference with the right to property; in that avenue, however, the review will be directed not at the rule itself but at the practice of the court of instance. The fact that the legislature has not made any amendment to the concordat provisions in the recent period likewise suggests that the debate will continue on the judicial plane for some time to come.
Conclusion
The Constitutional Court found the regulation providing that a temporary respite is granted upon a concordat request on the basis of a mere determination that the documents are complete to be in conformity with the Constitution and accepted that the legislature may narrow the judge’s discretionary power in fields that are technical and require swift intervention. When the decision is read together with the 2024 annulment decision, it becomes apparent that what is decisive is not the narrowing itself, but whether the basis on which the narrowing rests is objective and reviewable in nature. The decision also has the consequence that the provision may not be reviewed by way of concrete norm review for a period of ten years.
Nevertheless, the balance on which the decision rests is not struck in practice exactly as envisaged. The courts of instance in fact conduct a review of content by examining the compliance of the report submitted with the standards. In our view, the source of this divergence is not the rule itself, but the fact that the standards concerning the nature of the audit report providing reasonable assurance have not yet become sufficiently settled in practice. Accordingly, the solution should be sought not in affording the judge a broad discretionary power, but in strengthening the regulations concerning the minimum content of the report and the liability of audit firms. The scope of the appellate remedy against decisions refusing a request for a temporary respite and the effectiveness of the seven-day objection afforded to the creditors are, for their part, among the issues that the case law of the regional courts of appeal will need to clarify in the period ahead.
- Execution and Bankruptcy Law No. 2004, art. 285/1.
- The provision was amended, together with its heading, by Article 15 of Law No. 7101 dated 28.02.2018.
- Constitutional Court, Merits No. 2025/249, Decision No. 2026/79, 16.04.2026, OG 14.07.2026 - 33310. References made below by paragraph number alone relate to this decision.
- EBL art. 286/1-(e). The provision was amended by Article 13 of Law No. 7155 dated 06.12.2018. For the procedures and principles, see the Regulation on the Documents to Be Attached to a Concordat Request, OG 30.01.2019 - 30671.
- EBL art. 288/1 and art. 294.
- EBL art. 297. Pursuant to that article, it may even be decided that the debtor’s power of disposition be entirely removed and that the activities of the undertaking be carried on by the commissioner.
- EBL art. 287/4 and art. 287/6.
- Constitutional Court, Merits No. 2024/27, Decision No. 2025/38, 11.02.2025, OG 03.06.2025 - 32919 (rejection as regards EBL art. 292/1-(b)); Merits No. 2024/10, Decision No. 2024/97, 04.04.2024, OG 06.06.2024 - 32568 (annulment as regards EBL art. 297/2).
- Decision, §§ 23 and 44. For the announcement and the seven-day objection period, see EBL art. 288/2.
- Decision, § 45. Pursuant to EBL art. 287/5, Articles 291 and 292 of the Law apply by analogy to the temporary respite.
- Constitutional Court, Merits No. 2024/10, Decision No. 2024/97, 04.04.2024, §§ 29-30 and 33. Pursuant to paragraph (4) of Article 43 of Law No. 6216, the annulment also covered the phrase “…and of the creditors’ committee…” in the same sentence.
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